Virgin Atlantic responds to European Commission About BA/AA

18th Nov 2009

Virgin Atlantic Airways, one of the world’s leading long-haul airlines, has responded to the European Commission’s Statement of Objections about British Airways and American Airlines’ plans to effectively merge. Virgin Atlantic has previously told regulators in Europe and the U.S. that BA/AA would be a monster monopoly and should not be allowed to go ahead.

In its submission, Virgin Atlantic goes further and says:

“The proposed BA/AA and Iberia alliance would have appreciable and lasting negative effects for both long-term competition and consumers.

“It would allow a combined BA/AA/Iberia to dominate on routes between London Heathrow and the U.S. and, compounded by the considerable barriers to entry, to use their combined market power to weaken competitors’ offerings, thereby further strengthening and entrenching their own dominance to the detriment of consumers.”

Last week, Willie Walsh, Chief Executive of BA, told analysts “I think it’s well recognized that Heathrow is full and the opportunity to acquire additional slots, while not impossible, is difficult.”

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Virgin Atlantic agrees with Walsh that Heathrow is full, and even being forced to give up a large number of slots would not be an appropriate remedy in return for allowing the proposals to proceed. Only a decision by EU and U.S. regulators to turn down the proposals, because they are anti-competitive, would be an acceptable outcome for consumers.

Commenting on take-off and landing slots, Virgin Atlantic says in its submission:

“We urge the European Commission to recognize that even extensive slot remedies on their own would not make this a suitable case for an individual exemption (from Article 81(3) covering EU Competition rules).

“Slot remedies alone could not reinstate an effective level of competition nor address the substantial negative effects which would arise from the proposed alliance.”

Last week, the head of American Airlines, Gerard Arpey, criticized a potential joint venture between Japan Airlines and Delta and admitted that high market shares and large slot holdings by airlines would pose a major threat to competition.

Yet, the Delta-JAL joint venture would result in a total capacity share on U.S.-Narita routes of 54%, significantly smaller than the 64% share that BA/AA would hold on U.S.-Heathrow routes.

The BA/AA/IB alliance would result in overlaps on six Heathrow-U.S. routes, where their combined capacity share ranges between a remarkable 47% to an astounding 100%.

Steve Ridgway, Chief Executive of Virgin Atlantic, added:

“We call on regulators on both sides of the Atlantic to listen carefully to what Messrs Walsh and Arpey now have to say about the constraints at London Heathrow and acceptable market shares for alliances, which contrasts sharply with the positions they have taken in trying to drive through their proposed alliance.”